Merry Christmas 2013

It has been a long time since the last time I posted. Job has driven me crazy and squeezed all my time. But this is Christmas. Please regard this post as a gift from me to you.

Merry Christmas.

An economist’s Christmas

A little Christmas levity courtesy of Lombard Street’s Dario Perkins:

If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three.’ As Winston Churchill noted, economists rarely agree on anything. And the topic of Christmas should be no different. Here is our guide to the macroeconomics of Christmas:

Keynesians – place a lot of emphasis on the ‘macro stabilization’ properties of Christmas. Ideally, they would vary the number of Christmases each year according to the state of the economy. This is best summarized by Paul Krugman’s depression paper ‘Wish it could be Christmas every day’, in which he also acknowledges his love of British glam rock. The Keynesians would like to see a larger role for the state, including publically-funded Santas.

Austrians – Believe Christmas is dangerous because it inevitably ends with a nasty January hangover. Also worry about the moral hazard implications of gift-giving and the propensity for overinvestment in Christmas decorations. Reject the idea of ‘public’ holidays, arguing the free market would lead to a better outcome.

Monetarists – Convinced they are the only ones who know how Christmas ‘really works’ and quickly become frustrated with other economists’ lack of understanding. Their thinking can be reduced to a simple identity, though this is vulnerable to shifts in the velocity of Santa’s circulation. Hardcore monetarists believe in the tight control of chocolate coins to prevent the hyper-inflation of waist lines and the hyper-activity of small children.

Chicago School – argue Christmas has no meaningful impact because gift-giving nets out. Fully rational individuals will anticipate this and adjust their behaviour accordingly.

Macroprudentialists – busy thinking up ways to ‘smooth out’ Christmas. They would like to ‘lean against’ the festive season, perhaps by tightening credit and raising alcohol prices in mid-November and reversing these policies in early January. Some hardliners would like to introduce quantitative controls on Santa’s toy factory.

Secular stagnationists – claim Christmas hasn’t been as much fun since the mid-1990s, but can’t really explain why. Perhaps it has something to do with the music.

And, of course, the central banks are equally divided:

The Federal Reserve – big fans of Christmas and even have their own Santa lookalikey (though, unlike the real Mr C, he is set to retire soon). Becoming frustrated that Santa’s sleigh isn’t one of their policy tools and that they can only influence Christmas indirectly by giving presents to bankers and hoping they re-gift them to the rest of society.

The ECB – Generally in favour of Christmas but have a small and powerful minority who believe gift-giving is immoral and must eventually lead to hyper-inflation. President increasingly frustrated with this group’s sobering impact on their annual Christmas party.

The Bank of England – committed to enjoying Christmas on the 25^thDecember, subject to several clearly specified caveats and ‘knock-out’ factors. Have produced a 24,000 page paper explaining how these work.

The Bank of Japan – spent 20 years telling everyone Santa didn’t exist and that Christmas was a waste of time. Have now changed their minds, but seem to have a credibility problem.

And not forgetting:

The UK government – See Christmas as a good opportunity for the Queen to educate the masses, but worried about its intrinsic ‘socialist tendencies’. Ideally would like everyone to work on Christmas day so the UK can better compete with China. (Plutocrats are excluded, to support the demand for yachts/jets/country houses.) Believes Santa should be re-deployed to take money from poor benefit recipients and re-gift it as state-subsidized mortgages to potential voters.

US Congress – It just won’t feel the same this year without their version of the traditional Christmas family row.

Art is a lie that makes us realize the truth

Today I learn something very interesting from my Spanish teacher. Normally, she would teach me a unit in my textbook, but this evening she talked about Picasso.

Perhaps, I do not need to introduce him to you. He is very famous for his paintings. However, I guess many of you here do not agree with those art experts that his paintings are magnificently beautiful. I did not, either.  But it was the story of 10 hours ago. As I stated above, my teacher told me something about his paintings and it really made me wonder.

But I will skip the details of her lecture [sorry, but I need to have something up my sleeve). If you want to know, I think Google provides us a very wide range of choices. The main point here is that after her lecture, I still do not find any beauty in his paintings [ironic, I guess]. The only thing that I got from that very interesting lecture was the understanding of his paintings. Picasso is always said to have created very incomprehensible paintings. He is nothing like some artists that we are familiar with, such as Leonardo Da Vinci, or my favorite Van Gogh. To normal eyes like ours, Picasso’s art in the cubism period is very hard to comprehend. However, today, my teacher made his paintings more understandable. He was not drawing meaninglessly. Every detail in his works made sense. And only when you have some decent knowledge about art can you understand and find them priceless.

[Still I do not find it beautiful]

I have always wondered why people pay millions of dollar to buy a painting [except for some investment cases]. Some of the paintings are not really beautiful. But now I understand. Those rich people, like us, do not see any beauty in those marvelous paintings. The only reason why they accept to pay a lot for those arts is that they understand them and we do not. When they place a painting of Picasso on the wall, they are not showing to the world its beauty. They are showing to the world that they understand the art, the meaning behind it. The painting is not a source of decoration, but a certificate of knowledge because only people who have enough knowledge would pay for that. It has become a tool to emphasize the gap between those who have known and those who have not.

 “Art is a lie that makes us realize the truth” – Picasso.

I have to admit that I really want to have a Picasso’s painting in my room now. But I am afraid that I still do not have enough knowledge about his paintings to have one.

Maybe one day.

Maybe never.

Kz

When good intention turns bad

(This morning I read an article on Spiegel (a German magazine which is my favorite) about how legalizing prostitution has failed in Germany, and I have to say it did offer me a different perspective on this sensitive topic)

Recently, there has been suggestion about making prostitution become legal in Vietnam. As a typical eastern people, we find it quite uncomfortable to talk about such idea. We all know the negative side of prostitution through our school books. We all know where to find it through our friends. But we do not want to talk about it all. However, currently, this topic has gained much attention from the public.

Most people when argue about legalizing prostitution often base on 2 points:

1/ The benefits if we manage it.

2/ The morality of doing prostitution: for both buyers and sellers.

The first point is the reason why people want to legalize prostitution. There are some benefits according to them. They believe that by organizing this smoke-free industry, we can help reduce the STD, especially HIV/AIDS. We can even tax those sellers and increase government budget. They argue that we can never ever make that profession totally vanish. Therefore we should instead manage it and benefit from it.

The second point is why people turn down the idea. They blame the man who buys the service. And they even blame the woman who sells that. Eastern culture hardly accepts that very natural biological demand.

However, there is something missing here. People have forgotten to mention the prostitute’s benefits if we legalize their jobs.

After all, we are all only talking about ourselves, about “we”, “we”, “we”. We take HIV/AIDS into account because we are afraid that we may get infected somehow. We consider management because we cannot stop it at the first place. We want tax so that we have more to spend. We talk about moral because we do not want our husbands to be spoiled. But we forget to talk about the main person here: the prostitute.

What will happen to the prostitute if we legalize her profession?

When a girl accepts her job at a brothel, she has to work intensively, sometimes more than the pre-legalization period. How can this happen?

It is because when we legalize prostitution, we will create a free market for it. Free market means more competitors, new standard and tax. Now that the brothel owners have to improve the facilities to meet the law standard, pay tax, compete with each other, they will have to increase the commission received from their employees. The prostitute therefore needs to work harder if they want to maintain the same wage.

Human trafficking will be a big concern as brothel owners will be searching widely to have more employees. Because now they stand on a more firm and legal ground, they can easily employ more women than before to meet the increasing demand. More women will take a risk of working as prostitute and their futures are uncertain for the career only lasts 20 years at most.

Moreover, there will be no easy way to quit as the brothel owners always know how to get things on track. Even when prostitution becomes legal, police are still not a reliable support. People know that there is a blur connection between the police and those brothel owners. Before the legalization, if a prostitute breaks out because of being abused, she will receive much help and sympathy from the community. But if prostitution becomes a legal job such as banking or teaching, I do not think she will receive the same amount of that because now everyone is equal and she is no longer miserable for we are all similar at our own jobs.

In the end, the prostitute does not benefit more if her profession is legalized. They will perhaps be safer. But there are also new problems they have to face. The law will not fully protect them.

When we study economics, we learn about benefit and cost. Any project whose benefit is bigger than its cost should be carried out. But we do not pay attention to who will benefit and to who will pay the cost. We cannot know exactly whether the benefit of legalizing prostitution is bigger than its cost or not. But there is one thing we have done: we have talked about the society so much that we almost forget those women.

The society may have a win. But this win will stink if the main character does not.

  

Kz

The cost of Korean war [and everything]

Recently, there have been concerns about a war between 2 brothers: Koreans. North Korean, led by Kim Jong Un, is said to be ready for a war against America and South Korean. Put aside all the politics, how will the war cost if it breaks out?

The first cost to be estimated is the cost of carrying the war. It consists of the cost of buying weapons, curing the wounded and restructuring. Because both countries already have their arsenal, the cost of weapons will only be a major factor in case the war does not end early. Take both sides’ military ability into consideration and we may all agree that the war will not endure long and the winner is South Korea. Then, we can neglect the cost of weapons in this war. However, if the North is able and willing to launch a nuclear missile, the casualty and damage will be very severe, which will lead to the dramatic increase in cost to cure and restructure.

The second cost will be the opportunity cost. South Korea is one of the most developed countries in the world. Currently, there are some Korean companies which dominate the world market in some areas such as technology, car, … Moreover, South Korea stands between China and Japan, which is also a very busy sea lane. A war will drag down the South Korea’s economy and close the shipping lane from China to Japan which crosses Korea. The whole world will suffer from the war, not only the Asian neighbors. We will have to witness a rise in smartphone’s price, and a rise in price of products made in Japan with materials from China.

Totally, the cost for the Korean, according to many experts, will be about 0.5% world’s GDP - $350 million.

It may look small if we know that the stimulus plan of US solely costs more than $700 billion. However, this figure may increase much if the war happens next year due to the discount rate. Discount rate helps us to calculate the future value of the present cost and vice versa. If the world’s economy is expanding faster than the discount rate, then delaying the Korean war will only make it more expensive because 0.5% GPD of the future will greater than 0.5% GPD today. Moreover, if the North keeps threatening by carrying out small attacks but not a massive campaign, the cost of war will add up and get infinite, not to mention the casualty.

However, the total cost may get decreased if we take the war’s consequences into account. What will happen after the Korean war? North Korea is likely to be liberated from the recent regime. There is a high chance that after many years of suffering, they will abandon the Socialism model and purchase Capitalism model instead. In 2012, GDP of North Korea is about $40 billion. Assumingly the country, like many other emerging economies, will grow at an average 7% over 10 years. Then, after a decade after war, GDP of North Korea will duple and reach $80 billion. The figure does not look impressive. In fact, if North Korea wants to compensate for the damage it caused, it needs at least 35 years.  But that is the perspective from 100 years ago. Today, the world is getting used to the word “globalization”. No countries, except North Korea, are now standing alone in the open market. If there is change coming to North Korea, the whole world economy will benefit from it. The world can export its product to the 25 million people market, and also import low cost goods from that. It is difficult to calculate exactly how much the benefit will be, but we can sure that it will decrease the compensation time greatly. Moreover, recently, the world has sent billions of dollar to aid people in North Korea. If the war breaks out, the North loses, the regime changes, then that cash flow will turn into investment instead of aid. And that investment will help reduce the cost of war.

Obviously, no one wants a war, especially South Korea. But if it has to be done, then the earlier the better.

War is bad. We know that. But it is not completely bad. It can kill thousands of people but it can also save millions of people. Sometimes, we are biased to think something is completely bad or good. We look at something and immediately know its nature thanks to the knowledge of other people. We do not mind calculating again. We learn about the benefit and cost, but we hardly apply it successfully because we sometimes cannot estimate correctly the benefit in short-run and the cost in long-run.

The greatest trick the devil ever pulls is to convince the world that it does not exist.

April, 2013.

Kz and Inor.

On energy, and of course Earth Hour

2 years ago, I had an article on Earth Hour campaign, about how it failed to provide the truth and how it succeeded in luring all the young and energetic people who were always eager to contribute. Now, fortunately (for me), I have more evidence about the so-called environmentally-friendly campaign.

The base of the event is to encourage people to turn off the using-electricity device, especially light-bulb, to save energy and therefore reduce CO2 emission. The idea seems to make sense: if we do not use electricity, then no CO2 emits. However, there are some mistakes and problems with the campaign.

To begin with, it actually does not reduce the CO2 emission. Worse, it does increase that. How is that possible? First, all the engineers know that a small decline in electricity consumption does not necessarily translate into less energy being pumped into the grid, therefore will not reduce emission. Second, the cozy candle lights. Among many household devices which consume electricity, Earth Hour focuses intensively on the light bulb. It is undeniably good marketing idea. No one will notice that Earth Hour is on the air if we just turn our wash-machine off. In the modern world, darkness catches our eyes faster than the light. However, there is a unwanted consequence of this brilliant idea. In order to make our eyes not just a decoration (and perhaps to make the event more observable. Who knows?), the campaigners of Earth Hour have used the cozy candles, which seems so natural and friendly to the environment, to bring back the light. Make no mistake, candles are still fossil fuels, and almost 100 times less efficient than your light bulbs. Using one candle cancels out even the  THEORETICAL CO2 reduction, using two candles means you are doing more harm than good (Not to mention the effect of CO2 on global warming is still on dispute)

Secondly, Earth Hour gives a false conception about global warming. Tackling global warming is absolutely not that easy. It needs more effort than just turn off your bulbs. If everyone in the entire world cut all residential lighting, and this translated entirely into CO₂ reduction, it would be the equivalent of China pausing its CO₂ emissions for less than four minutes. Switching off lights will only cause it harder to see.

Thirdly, the worst thing about Earth Hour is how it ignores the fact that electricity has been a miracle to humanity. Without the stable and decent light made when electricity burns vonfram, we cannot have an active and productive life after sunset. Without the ion running through the tube, there will be no computers, no cars, no air-conditioners. Electricity has raised the human’s productivity to a new level. We need more of it, not less.

However, I am not here today just to talk about Earth Hour. There is something else I want to share with you, in case you are still confused.

The next revolution on energy will not be on whether we can find another oil well, or another source of energy, or we can make those recent renewable energies such as solar and wind energy cheaper and therefore available. The next revolution will be on the efficiency of using and storing energy.

If we have some modest knowledge about physics, we may know that electricity is a very special product because it is very difficult to store energy. For example, in the rain season, hydro power plants work at their largest capacity, and produce lots of electricity. Sometimes, the supply is bigger than demand for energy. However, we cannot save that surplus energy for the dry season. The best thing we can do so far is to get rid of that tragic to store those powers into battery. Those batteries work as inventories for electricity. The only problem with battery is again, efficiency. We still produce surplus energy and those batteries still are not able to store all of them. If we can, in a near future, discover a better way to make battery, then searching for another source of energy will make sense.

It is undoubted that no matter how much energy we can have, we will run out of it sooner or later if we do not know how to use it efficiently. One of the most famous example of how efficiency matters runs along with technology race in smartphones. Recently, the smartphone market is divided mainly into 2 big competitors: iOS from Apple and Android from Google. If we have a chance to look the information of the devices running those systems, we may notice that iphone, which runs ios, always has a smaller battery capacity than those from Android. However, the customers who complain about battery life are usually the ones who use Android. Apple does not need to make a big battery, which will lead to bigger phone, to keep their phone last as long as those running Android because they know how to make their OS use battery more efficiently. I still remember 4 years ago when the first Ipad was introduced, an expert claimed that if iPad still used the old technology from 20 years before, it would require the whole Hoa Binh hydro power plant to supply the energy.

Efficiency, not Earth Hour or solar energy, will save the Earth.

kz (and Slate.com)

The weak are meat and the strong do eat

The (expected) news finally comes: K+ has successfully held the right to broadcast EPL (English Premier League) in Vietnam territory. To most people who do not pay much attention to the football world, it is such a normal news because they believe that they can always easily watch football every weekend as they have done for the last many years. However, things have changed much since Vietnam is joining the world market.

Seven years ago, we had the right at only $ 4 million. In 2009, we watched football with the cost quadrupled, $ 19 million. Now, the price has skyrocketed to $ 40 million. Though the GDP of Vietnam has positively risen through out that period, such an increase of price is still unacceptable and unbearable to most people’s opinions. The first time people heard of the fact that an American company had bought the right to monopoly broadcast ELP in Vietnam and they only transferred that right at only at least $37.5 million, many stated firmly that we did not have to buy it at any cost, and we did have many other matches to watch instead of EPL. And now when K+ finally got the transfer, most of us start to blame it for being selfish and foolish.

Does K+ deserve that?

Many people blame K+ for raising the cost of broadcasting EPL in Vietnam. They believe that by monopoly negotiating with MP&Silva, the company holding the EPL TV rights in Vietnam for the last 3 years, in order to dominate the market, K+ had given the world good reasons to increase the price. In fact, no matter K+ did negotiate with MP&Silva or not, the price had already increased dramatically. MP&Silva had to pay $13 million to own the right. The world has no longer seen Vietnam as a country walking out of the war, living in poor. Vietnam now in other people’s eyes is a big market of population over 80 million with income rising steadily day by day. Many of us are buying luxury cars and modern smartphones. Furthermore, Vietnam is famous for its passion for football, which can easily be acknowledged by observing the atmosphere every time the national team plays. When the world realized that there was a huge demand for football in Vietnam, nothing can stop the price from increasing. Besides, K+ at that time was a new player, and the only way to compete in a very crowded play ground was to have a better and unique weapon. And that was EPL. The only mistake that K+ made 3 years ago was that it had not cooperated with other channels to have a better price.

That was the story of 3 years ago. The recent story is not very much different. K+ is still the only one that can own the right to broadcast EPL. The price is much higher, doubled from the previous one. Many people cannot accept the fact that a company whose 51% of share is from the government pays more than 1000 billion VND just to dominate the market while it can get a better price if it cooperated with other ones. There are 4 parts that needs regarding: 51% of share from government, 1000 billion VND cost, better price and cooperation.

First, it is true that 51% of share of K+ is from VTV, which is a government enterprise. And it is also true that the other 49% is from a foreign partner. When K+ was negotiating about the broadcasting right, VTV had no idea, which means the whole transaction was done by the foreign 49%. The money was paid by Canal – the foreign partner, not K+. With 51% of share, VTV has all the means of preventing the transaction, but it has done nothing. It raises a question about whether VTV really wants to have the broadcasting right or not.

Second, $40 million. Many people argue that with $40 million, we can build many schools and hospitals which are very scared recently. Such argument reminds me of years ago, HCM city authority planned to cut down the annual new year celebration firework and give that money to the poor. The plan did not work out because the people wanted to see the firework more than giving to the poor. They said that though the right thing was to give gifts to the poor, the firework was more important as it could help raise the spirit for the new year. The firework is only 15 minutes long. The EPL is undoubtedly a much bigger spiritual dish. Some may complain that EPL is very bad dish because it brings some social evils such as gambling. However, everything has 2 faces. EPL is among a very few things that can bring people together on Sunday and Saturday night. I still remember 3 years ago, when K+ got the right and people claim to stop watching football, there were some concerns that it would lead to other problem such as street racing, … Luckily, it has not happened because people are still able to watch football in one way or another. Back to the figure $40 million, it is inarguably a huge number. It equals nearly 1000 billion VND. Our population is more than 85 million. Then, it means each of us will pay nearly 12,000 VND or half a dollar to watch the most exciting football league in the world in 3 years. Is it cheap or expensive? I will let you answer the question. Just consider this fact: in Thailand, the right to broadcast EPL in the next years cost 8 times more than Vietnam.

Third, a better price. People believe that if there had been a co-operation, there must have been a better price. Indeed, no one could guarantee that a co-operation could lead to a better price. IMG had bought the right at the cost of $37.5 million. And I see no reason why they would buy it at a lower price.

Fourth, co-operation. Like 3 years ago, this time K+ was not invited by VTV to discuss about the EPL broadcasting right. I could not understand why that happened. Everyone knows that K+ is the only company together with VTV that is able to buy the TV right. VTV made a bad move, now it is suffering from it. K+ has nothing to be blamed.

In business, no one wants to be a fool. No one wants to buy high and sell low. No one wants to be left behind because of the normal emotions of the public. And neither does K+. It absolutely does not want to buy the right at such a high cost. But it has to. 3 years ago, it promised with new user the right to watch EPL with high quality. Now, if it could not get the right to broadcast EPL for the next 3 years, it would fail to complete its promise. Users will abandon K+ and even sue it. It has nearly no choices but to buy the right at any cost. We could have saved lots of money, but we have turned that opportunity down for some unknown reasons.

Everyone likes talking about free market mechanism. And when there is a move, everyone is discouraging it. Indeed, the society needs K+, the one who dare to dream and dare to do.

And if you wonder how K+ could survive for the last 3 years while everyone dislikes it, you can take a look at the coffee shops and hotels around you. There was no monopoly. Just the weak are meat, and the strong do eat.

In business, business is business.

Kz and Inor.

I may start using Facebook again

It has been a long time since the last time I spent much time on Facebook daily. It is true that many people use Facebook to update and spread the news, and sharing really good stuffs. Sadly, they only account for a few percent. The rest was not that inspirational. To me, Facebook was some kind of a stage where lonely souls expressed their feelings in order to attract attention from others. However, recently, there have been two “innovations” coming from Facebook that may change how we use Facebook and perhaps, the whole Internet world.

I will talk about the first innovation, also the more important one. It was the idea to collect fee when you send a message to an inbox of a complete stranger. The fee varies among $1 to $100 and depends on many factors such as how close you and the receiver are linked or how famous that person is. It may take up to $100 if you want to send Mark Zuckerberg a message. That idea seems stupid because no one would pay such a lot of money to send a message to another person while they can do it for free with e-mail? Facebook must be in very desperate need of money then. It is true that Facebook is facing some problems at the moment. However, such problems are not big enough for them to risk their reputation for a little money. If we look closely and carefully at the idea again, you may find it may shape how we use Internet and even get rid of e-mail. Normally, our e-mail receives mails from our friends, or the people we know, and from complete stranger, mostly advertising companies. The current Internet world has led to a fact that we may get tens of mails every day and most of them are annoyingly undesirable. Those unwanted mails usually come in bulk and are called “spam”. With the advance of technology nowadays, we have made great effort to reduce the spam. However, such move is never good enough. We still sometimes receive e-mails luring us into using some medicine and more badly, sometimes we have to check the whole spam box because we are afraid we may miss some important one. Here comes the solution: Facebook. Facebook’s new idea restricts people from spamning other people inbox. If you are not on the friend list of a particular person, you have to pay to send him a message. And unless it is some kind of important business, no one will pay to do that. That makes those advertising companies no longer able to send thousands of e-mails simultaneously. We are free from the fear of spam. However, not only do users benefit from that idea but Facebook also does. First, the money. Then, the users. If people want to send message with no charge, they have to get other people to use Facebook and be on their friend list. After months of slow growth, Facebook has finally found a new way to get users and to get their users more connected. Now that more people will recognize the new power of Facebook message, it will ring a bell to other companies. Currently, we are using Gtalk for chatting, iMessage for SMS, Skype for Video call, Gmail and Hotmail for mail. Now we have Facebook messenger which can do all these tasks. And the most crazy part is that not only is Facebook Messenger free but it also is better. I believe, in the not so far future when people get used to idea of using Facebook for everything, Facebook phone will appear and it may be the end of other companies.

Though the idea of collecting fee seems big and promising, it has not come to reality yet. There is another innovation from Facebook recently and it is very near to us now. I want to introduce to you the new search engine of Facebook: Graph Search. Again, Facebook would look stupid if it wants to compete with Google and, perhaps Bing, in the search battle field. Google has become a verb already. However, Facebook does stand a good chance of winning this game, at least among their users. Normally, we use Google to ask THE WORLD about everything. Now we can use Facebook to ask OUR FRIENDS AND THE WORLD about everything. It changes the way how you put those key words into the search field. With Facebook, you may ask and figure out “restaurants liked by friends living in my hometown” or “books read by friends who works at a bank”. It is true that you can still ask Google for such things. However, the answers may not be as satisfied as Facebook’s. So how are your Facebook’s answers different and event better than Google’s? It is because the Facebook’s answers come from your friends who are somehow not so different from you. In other words, the answer is personal. It aims directly at you. If the idea comes into practice, and it will do, it will make all the “Like” and “Checking” make sense because Facebook’s new search engine works according to that. That is one of many moves move from Facebook to make everything connected. There have been relationship pages and now the graph search. Now I can easily find photos of me and my girlfriend. More interestingly, if Facebook cannot show the result, it will show Bing’s links. It will make Facebook search not so different from Google because Bing is already a big competitor in the game. The only concern will be the privacy. But Facebook has already updated a new privacy policy to help user control their content better. I have to say that I am really looking forward to experiencing the Graph Search. And I believe most of us will spend some hours searching for weird things such as “friends like Justin Bieber and Nicky Minaj”.

In the battle among the Internet giants, there is hardly any bad move. There have been rumors about Facebook going down soon. However, such scenario will not come soon in the near future. Those two new innovations will not only help Facebok go father but also may shape the Internet world again.

Kz

Jan, 2013

Collecting ATM Fee: Why so serious?

Since March 1^st, a new law which allows banks to collect fee from ATM interbank transaction will come into practice. Before the new law, banks are not able to charge their customers for transaction from their own ATM.  However, the new policy has raised many negative reactions from the public. Why do people complain about that? And are they making sense?

Lots of comments on the law express a desire to know why banks still charge fee while their money at bank account receives only a very low interest rate. They compare their current account with the deposit account which receives much higher rate and then state that they have already paid the transaction fee through the low rate of their account. It is true that the current account always have a lower interest rate than deposit accounts. But that does not mean the customers do not have to pay for the service they use. The ultimate rule in economics goes “there is no free lunch”. Since the birth of personal property, people have always looked for a safe place to hide their property. They have used boxes and anything which has a hole and a lock. They have buried money in their garden or put it in the roof top. Now, we have a better way to keep our money safe: banks. We deposit our money into our bank account and are freed from the fear that one day a theft will make us a beggar. We can withdraw our money at any moment. We do not need to carry lots of cash and instead use a small well-protected plastic card to pay for our purchasing. We can do all that due to our bank. And we still demand them to pay more money for us and supply service for free? Put ourselves in a bank’s shoes and consider whether such demand is fair. In Vietnam, however, banks still pay for our current account in order to encourage people to stop using cash. In contrast, in other developed countries, such as America, current accounts do not receive any interest rate because it is against the law. Therefore, to attract more customers, those banks provide many free services, such as ATM transactions. So, your call: Interest rate or 1,000VND [$0.05] for each occasional transaction? I am not rich man. I am kind of poor instead. But I still have to wonder what we can do with 1,000VND these days?

There are many comments about the fact that ATM system is too bad and therefore banks do not deserve to collect the fee. I myself experience some frustration when I try to withdraw money from the ATM. But to say that the whole system is too bad is not completely true. There are moments that the system does not work well due to some reason such as overloading, … There are some banks that do not have strong ATM systems. Sometimes, I passed by lots of ATM though I was in need of withdrawing money because they were not from my bank. I was afraid of being overcharged. Due to the new policy, all banks are now in one price standard. Now, there are only 2 kinds of ATMs: my bank’s ATM and others. And I can know how much I will be charged. The new policy will connect the whole system, which will make it better and therefore, deserve the payment. Moreover, fee will actually help to improve the system, at least better than when the banks do not collect it.

Perhaps people have not carefully looked at the new policy. The new policy only regulates the cap price, which means the maximum fee that a bank can charge us, not the floor price. Banks can still choose not to charge. They can apply any price in the range from 0VND to 3,000VND. If you are not satisfied with your bank’s fee policy, just turn to other banks. Of course, at first, there will hardly be any banks which have a lower fee than others. However, competition will make banks run a race to reduce their fee in order to attract more customers. Some people may not be able to change their bank because their boss uses it to pay their salary. But think again and further, why does the boss keep using the bad banks? There must be some benefits for both him and the company that they are working for.

Since I study economics and banking, sometimes I have small lesson for the new comers. Always before my lesson about banking, I asked them about their reasons to choose a bank. The answers usually were safety (in the first place), interest rate (in the second place) and convenience (in the third place). There was little concern about the ATM fee.  Now we are exaggerating the whole thing. Some people have already declared to stop using ATM and instead turn to bank service at big buildings which can take much more time. It is their choice and therefore we cannot say whether they are right or wrong to do that. However, to me, I would be very appreciated if they do that. Now that less people use the ATM, the whole system will get smoother. I will enjoy a better service and perhaps even get a job, because the demand for banking tellers is rising.

And good luck waiting at the chair. You’d better go to the bank early to have a good number.

Kz